Too often kids head off to college and take out the maximum amount they are eligible for in student loans, rent a nice apartment, and have fun going out with friends with little regard to the amount of money they spend. They may rationalize that they will only be college students once, and now is the time to have fun. However, that fun can rapidly come to a halt when they attend the financial aid exit seminar before graduation and realize just how much those student loans will affect their lives once they graduate.

If you have high school students and haven’t taught them financial lessons pertaining to college, now is the time to sit them down for a discussion. (Even if you have been teaching them financial lessons all along, reviewing what they know is a good idea.) Here are some topics you may want to tackle with them:1. How to create a realistic budget. Talking about a realistic budget is one thing, but why not take it a step further and actually give them the chance to manage the budget. Maybe you could put them in charge of the grocery budget for the month. They get a certain amount of money and have to buy all of the groceries for the month. Or, some parents give their children a clothing allowance, and the kids have to buy all of their clothes out of that money. When the money is gone, it is gone.

2. How to shop for a bargain. Hand in hand with teaching them how to budget is teaching them how to find a bargain. Teach them about the deal sites to save money on entertainment as well as how to use coupons. There is nothing wrong with heading to the thrift store to find a few items. (The thrift store might become essential if they try to extend their clothing allowance.)

3. When the gravy train ends. Parents often take their kids out to eat and pay for the kids’ meals. The problem is that this arrangement often never ends. I have a friend who is thirty and still expects her parents to pay for her when she goes out to eat with them, and she goes out with them a few times a week. Let your kids know when the gravy train ends. What are you willing to do for them financially in the future, and when are they expected to stand on their own financially?

4. How to choose their college major carefully. Too often kids pick their college major based on what they enjoy or what they are good at, with no regard to the earning potential of that job. I majored in English because I love to read and write, but a B.A. in English doesn’t get you very far. I had to go on to pay the expense of graduate school before I could actually use my degree. Is there a way your child can blend their passion with a career that can actually earn them money when they graduate?

5. How much they will pay in interest over the life of a student loan. Student loans can be essential to help students pay for college. I don’t have a problem with student loans, per se, but I do have a problem with college students maxing out their student loans to live the good life while in college. Teach your kids how much they will have to pay back monthly, and how that compares to the average salary they will make. A $500 student loan payment can certainly have a damper on their post-graduation way of life. Also, show them how much they will pay in interest over the life of the student loan. It’s okay to take out loans, but just take out the minimum needed.

What financial lessons did you teach your kids before they went to college? Which financial lessons would you add?

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Great points. My greatest financial lesson pre-college was getting, and keeping, a job through high school. Lessons 1-3 that you listed were all learned through my high school employment. My parent’s helped me find the job, and with money coming in to my own bank account, I was able to naturally ween myself off my parent’s assistance. I learned to budget, look to the value menu at fast food places to make my buck go further, etc.

Well if you parse out one sentence and ruin the context of the paragraph, sure it sounds sketchy. But her point is valid: kids need to find ways to blend their talents with majors that can lead to a bright career.

Not saying it’s the only path, but it’s something that should be discussed and involved in he decision-making process.

This is coming from a kid who went to an art high school, and instead of pursuing a bachelors of fine arts, decided to pursue a more well-rounded, multipurpose degree (communications/multimedia), that still enabled me to include the things I love (art, design, media, etc) into a “Real-world” degree.

I’m not going to say “don’t tell them what to do,” but I’ll just leave it at this. Encourage them to go on a career path which aligns with their goals but still is lucrative. In this economy you don’t want little Johnny under your wing (rent, insurance, clothes, utility bill) for years and years. Not to mention what do you do with his massive student loans he accrued when he was getting his degree in Dance?

I would also add to see what firms recruit from specific schools. Your son or daughter will have a better chance at the firms that recruit from their school vs. a regular online application. Choosing a school is a big deal.

great points, maybe if they are passed on we can avoid continuing the current student loan debt crisis. I agree about the happiness thing but don’t expect to have someone else pay your debt, if you didn’t realize the cost or can’t find a job when you graduate.

-borrow less/nothing for anything (think community college/car sharing/eating less meat)
-work harder (for most people life is pretty easy relative to 100 years ago or more than half the worlds population)
-entertain yourself less (work is a virtue)
-think about how you are going to make a living, contribute to society, help others when selecting a major (how in the world can we have high unemployment but need computer programmers?) Its called work for a reason.

I wish I had received these lessons before I went to college. The only thing my parents said about college was that I could take out loans to pay for school, so it didn’t matter if I went to a private or a public university. As much as I loved my private university experience at the time, I will not allow my children to go to a private university unless they have a full ride or enough scholarships to make the out of pocket expenses at or below the cost of a public university education. Now I’m stuck with $120+K in student loan debt, which costs me ~1/3 of my income each month. I did, however, choose a major based on job opportunities (chemistry) rather than how much fun it would be (theater).

I remember an old article (I think from the WSJ) with a great tip for teaching kids how to relate to money. The example given was a teenager asking for money at the mall.

Scenario 1 is to give them $20 and say that you expect change. This incentivizes the child to spend as much as possible, because they have nothing to lose.

Scenario 2 is to give them the $20 and tell them they can keep the change.

Either way, you are basically out the same amount of money, but in the second scenario, the child will be incentivized to spend more frugally and save the rest for something else later. A much better habit.

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